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ABI Reports Earnings Slump, Flat Revenue in Q2

NEW YORK, Jan. 24 - Applied Biosystems reported that fiscal second-quarter earnings contracted amid floundering sales of its gene-research instruments and increased R&D spending.

The company said that net income for the three-month period ended Dec. 31 fell to $49 million, or 23 cents a share, from $58 million, or 26 cents a share, in the same period last year.

Total revenue remained unchanged at $411 million as a 4 percent dip in instrument sales offset a 16 percent jump in sales from royalties, licenses, and contract research, the company said on Wednesday.
 
Additionally, shares of ABI plummeted as much as 27 percent on Thursday after the company conceded on Wednesday that its fiscal 2002 earnings would fall short of Wall Street expectations. In early-afternoon trade on the New York Stock Exchange, ABI shares were down $8.10, or 24 percent, at $25.64.

As a result, two analysts who cover the company have cut their ratings: Deutsche Banc Alex.Brown analyst Sheryl Zimmer lowered her rating to "buy" from "strong buy," and Meirav Chovav, an analyst at Credit Suisse First Boston, lowered her rating to "hold" from "buy," Reuters reported.

 

Late on Wednesday ABI reduced its earnings estimate for the current fiscal year to between 80 cents and 90 cents a share, below analysts' predictions of more than 94 cents.

 

"We don't have a lot of confidence for this year, as you can see," Tony White, CEO of Applera, ABI's parent company, told analysts in a conference call on Thursday.

The tepid financial results, downgraded forecasts, and subsequent diminished stock ratings together comprised the grim second shoe to drop after the famous president of its other company unexpectedly quit.

 

White has since put himself in the driver's seat at Celera after Craig Venter abruptly vacated it on Tuesday. The move by Venter, who helped create the company, was a shock to the industry and leaves Celera with no clear leadership amidst a risky and much publicized transition.

 

Although insiders speculate that White has known about Venter's departure for as long as six months, and that he has been spending extra time away from Applera's Norwalk, Conn., headquarters to bring himself up to speed at Celera's Rockville, Md., base, White spent most of the conference call deflecting questions to the handful of participating subordinates.

 

"Uh, I don't know that one. Mike, you wanna take that one?" and "Mike, you wanna take a shot at that? I sure can't," he would say to Mike Hunkapiller, ABI's president, in response to questions related to Celera Genomics and Celera Diagnostics.

 

"I think we'll see," White finally said when asked about his plans to replace Venter and put in place a team of new executives that will help guide Celera downstream. "I don't know how many people we need to fill the various capabilities we need to acquire. Certainly we need a leader here. Depending on the profile of that person we select, that will dictate what complementary skills have to be acquired."

 

"Obviously we need a head of R&D," said White. "Could that be the same person? Probably not. But depending on the skill set of the president, then that will dictate the intensity of the various subordinate needs.

 

"We're going to build a therapeutic-discovery and development management team here," he reiterated. "We're obviously off to a pretty good start. ... There are many other people here who are very talented in the basic sciences that support this.

 

"Where we're lacking--still lacking," White explained, "is enough depth and experience in drug development, discovery, the business aspects of all of that. This is something I've never done, this management team has not got that much experience at [drug development] so we're gonna focus on getting the very best people on the planet in here to do that."

 

Asked when he expects to have that plan in place and when he would like to find a replacement for Venter, White quipped: "Yeah, that would've been yesterday but I missed it."

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